Lower primary surplus: a silver bullet to boost growth in Brazil

Alberto Tamer, a columnist with Estado, argues that even if stimulus measures (including tax breaks and lower interest rates) fail to revive Brazil’s economy, the government still has a “silver bullet” in the form of the primary surplus – the 2012 target is 3.1% of GDP – which the government can reduce to prop up growth.

However, Tamer says the use of fiscal loosening as a counter-cyclical tool should only be invoked in an extreme scenario. He quotes Felipe Jump, an economist with Tendencias Consulting, who makes a case for incorporating “qualitative criteria” into the budgeting process, which would generate more space for spending in times of economic slowdown. In Timetric’s view, Brazil should refrain from reducing its primary surplus. Fiscal loosening could get in the way of efforts to permanently reduce Brazil’s interest rates closer to levels in other emerging markets.